Learn more about crypto with this collection
Understanding the basics of cryptocurrency
How to store cryptocurrency securely
Risks and benefits of investing in cryptocurrency
The purpose of tokens
Most tokens are used with decentralised applications (dApps). When developers create their tokens, they can be used to activate features of the application they were designed for.
Some tokens are created to represent a physical thing. If you want to sell your house using a smart contract, you can't physically put your house into the smart contract, but you can use a token that represents your house.
For example, WePower (WPR) uses a token that represents electricity. Users can buy and sell electricity on the blockchain using smart contracts.
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Understanding how tokens work
Tokens are used to interact with decentralised applications that are built on top of different blockchains.
For example, Civic (CVC) is an application that keeps track of encrypted identities on the Ethereum blockchain. If you were to go on a foreign holiday, you'd need...
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Tokens
Token are not digital coins. Tokens are created on existing blockchains. The most common blockchain token platform is Ethereum and tokens from this platform are known as ERC-20 tokens.
There are also other tokens such as NEO, Waves, Lisk, and Stratis.
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Security Token, Equity Token, or Utility Token
- Security Tokens. Most tokens issued by Initial Coin Offerings (ICO) are security tokens. This is because the buyer invests their money in the ICO expecting a profit.
- Equity Tokens. It represents some stock or equity in the company that issues it.
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How tokens are created
Creating a token takes little technical ability, but it requires the developer to spend some native coins to the blockchain on which the token is being created.
For example, a creator will need to spend some Ether to create a token on Ethereum. This is used to get the miner...
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Digital coin definition and examples
A digital coin is an asset native to its own blockchain. For example, Bitcoin exists on the Bitcoin blockchain, Ether operates and functions on the Ethereum blockchain, etc.
Digital coins don't move physically when you send and receive them. They exist as data on a ...
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Digital coin uses
Digital coins are generally used the same way as real-life money in your wallet. For example, Bitcoin can be used to pay for goods and services all over the internet and often in real-world places too. You can store it for a long time or swap it for something of equal value.
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People who are new to cryptocurrency often confuse the term "token" and "coin". This guide defines the two terms and provides some examples for a better understanding.
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